I’m working on two problems involving WACC. One finds the cost of debt using outstanding debt, while the other, it seems bases it’s cost of debt on a new issuance.
The following problem uses outstanding debt to calculate the YTM (i.e. cost of debt):
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The next problem reads as follows:
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The answer is 7% * (1-40%) = 4.2% while I thought it would have been the average of the two YTMs (8%). Why does the first problem use outstanding debt while the second seemingly uses the current issuance?
Thanks!